DRBS Rates CHIP Mortgage Trust, Series 2009-1 Floating Rate Medium Term Notes at AAA

DBRS has today assigned a rating of AAA to the $150 million Series 2009-1 Floating Rate Medium Term Notes (the Notes) issued by CHIP Mortgage Trust (the Trust).

The Trust regularly issues notes to fund reverse mortgages originated by Canadian Home Income Plan Corporation (CHIP), a wholly owned subsidiary of HOMEQ Corporation (HOMEQ). On October 13, 2009, HOMEQ announced that CHIP became a federally regulated Schedule I bank known as HomEquity Bank.

The Notes have an expected final payment date of October 26, 2010, and if not repaid on such date, the Notes will pay the interest of one-month banker’s acceptance (BA) rate plus 3% per annum thereafter. DBRS’s rating addresses timely repayment of principal and interest by the legal maturity date (which is October 26, 2034), not by the expected final payment date.

The rating of the Notes is based on the following considerations:

(1) The conservative underwriting standards associated with the origination of the reverse mortgages, including the use of qualified appraisers; the reduction of appraised values by region, property quality, property type and specific location to reflect potential market illiquidity; and the use of conservative actuarial tables in determining the expected occupancy term.

(2) A large diversified portfolio with residential real estate situated in or near major urban centres across Canada, with expected concentration in Ontario.

(3) The level of ongoing review and reappraisal of the properties associated with the reverse mortgages. Reappraisal of properties occurs on a formal basis every five years or more frequently.

(4) CHIP’s extensive experience in originating and underwriting reverse mortgages.

(5) A first-ranking charge for Noteholders on all the assets and undertakings of the Trust.

(6) Full and unconditional guarantee by HOMEQ as to the payment of principal and interest of the Notes.

Note:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Reverse Mortgage Transactions in Canada, which can be found on our website under Methodologies.

This is a Structured Finance rating.